Question: 4. Assume that the financial variable ( x ) follows the process: [ frac{d x_{t}}{x_{t}}=mu d t+sigma d W_{t} ] where ( W ) is

4. Assume that the financial variable \\( x \\) follows the

4. Assume that the financial variable \\( x \\) follows the process: \\[ \\frac{d x_{t}}{x_{t}}=\\mu d t+\\sigma d W_{t} \\] where \\( W \\) is a Wiener process. a) Using Ito's Lemma, find the process followed by variable \\( y_{t} \\) defined as follows: \\[ y_{t}=x_{t}^{3} \\] Compare it with the process defined in (1) and comment on your results. [3 Marks]

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